Reprieve for Telstra in Senate delay

Telstra
has won valuable breathing space in its negotiations with the Rudd government over the $43 billion ­national broadband network as federal parliament deferred a split of the company’s operations yesterday.

The Minister for Communications,
Stephen Conroy
, also faced new business objections to his plans for the broadband network after he introduced measures to make the housing industry pay $500 million a year to connect new homes to the network.

And the Business Council of Aust­ralia (BCA) stepped up its criticism of the policy on a third front by warning that allowing the NBN to offer both ihretail and wholesale services would force other companies to abandon their ­investments in new networks.

But Seven Network chairman
Kerry Stokes
weighed into the broadband row by strongly backing the NBN concept and predicting that Telstra shareholders could benefit from a commercial deal with the government.

Telstra shares closed up 4¢ at $3.17, their highest for more than a month, as the company revealed plans to trial fourth-generation mobile phone technology, regardless of threats in the legislation to prevent it from accessing the necessary spectrum to provide 4G services.

Debate on the controversial bill to divide the company into wholesale and retail operations will not resume until May or June and some senators said they doubted it would be passed before the next federal election unless the government gave ground on its ­reform plan.

Senator Conroy blamed the coalition for filibustering to postpone the vote and others warned there was not enough time to resolve the impasse ­before the election, taking pressure off Telstra. “Time is very short and I think the greatest problem for the government is the opposition’s use of obstructive tactics to clog up the debate," said Greens senator Scott Ludlam.

The upper house will sit for three days in May and seven in June but would not resume as scheduled on ­August 24 if an election were held in spring, as many backbenchers expect.

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Senator Ludlam said the coalition strategy was a bigger threat to the telecommunications reforms than a separate dispute over whether the government should release a $25 million implementation study of the NBN prepared by McKinsey and KPMG.

“Senator Conroy has also put our support in jeopardy but he could fix that overnight by releasing the report," Senator Ludlam said.

Family First’s
Steve Fielding
is still opposed to passing the bill to separate Telstra while the company ­remains in negotiations with the government to transfer the company’s wholesale network to the NBN, splitting the company’s operations in the process.

The coalition could block the bill with Senator Fielding’s support ­because the vote would be tied and tied votes are lost in the upper house.

Senator Conroy indicated he would bring the reforms back to the parliament in May. “This wilful delaying tactic by the opposition is holding up vital reforms to the telecommunications sector," a spokeswoman said.

Mr Stokes said: “I hope Telstra and the government can come to some agreement, it’s probably the greatest opportunity for Telstra it could ever possibly have put before it – and I hope they will find an agreement.

“It’s in the national interest to have a really good broadband network available to everybody.’’

“And it’s in the national interest for Telstra to be part of the new era and building new-generation opportunities."

But the BCA slammed the federal government’s draft legislation for governing the NBN, warning that it could cause telecoms companies to abandon investments crucial to lifting ­national productivity.

The business group concluded that the draft law created “significant uncertainty" by giving Senator Conroy the discretion to allow the NBN Company to expand into retailing. Such a move could potentially allow NBN Co to compete with private sector providers such as Telstra, Optus and AAPT to directly supply end-users.

The BCA warns in a submission to a Senate inquiry that if the government does not remove the discretion in the exposure draft of the legislation, there is a risk of “lower private investment, a less efficient market and detrimental outcomes for business and household users of telecommunications products". The submission, obtained by The Australian Financial Review, says: “Uncertainty around the role of the NBN Company, particularly given its public ownership, will raise investor uncertainty.

“Clearly, if policy settings have the effect, intended or otherwise, of companies deferring or withholding ­investments, it will take longer for new technologies to get to market and Australia’s productivity will fall behind.

“The ministerial discretion proposed in this legislation changes the NBN Company’s role in the market, at least as understood from earlier announcements by the government and NBN Co, and creates significant uncertainty over its future operations."

The structure of NBN Co has been set out in a draft bill released for public comment by March 30, clearing the way for the legislation to be introduced into parliament in May or June. BCA policy director Maria Tarrant said there was “a continuing moving of the goal posts" around the policy.

Although the law would require Senator Conroy to consult with the Australian Consumer and Competition Commission before exercising the discretion, the BCA warns the scope to use the power “appears to be unlimited".

“It is also puzzling that the government would take action to remove vertical integration in the fixed-line sector only to then replicate the same integrated structure within a government business," it says.

“Furthermore, the suggested ministerial discretion lacks proper safeguards and will create uncertainty for competing private investors as long as it is in place."

The BCA submission was made to the Senate Select Committee on the National Broadband Network, which is chaired by Queensland Liberal senator Ian Macdonald.

The BCA submission also calls on the government to release the implementation study into the NBN. The coalition, the Greens, Family First and independent senator
Nick Xenophon
have also called for the release.

A defiant Senator Conroy declared on Wednesday night that he would proceed with the NBN despite the Senate’s delays to the Telstra separation bill and possible delays to the NBN Co governance bill.

Sticking to his plan, he introduced a third piece of legislation into the Senate yesterday to mandate the installation of fibre connections to homes built in new housing estates.

The Telecommunications Legislation Amendment (Fibre Deployment) Bill would require property developers, and possibly broadband providers, to bear the cost of digging the trenches and laying the cables to new dwellings.

The regulation impact statement ­issued with the bill yesterday estimated the requirement would cost $519.75 million a year assuming half the premises were fully connected to the fibre cable network and another half were made “fibre-ready" to be connected later.

“The policy should take effect as soon as is reasonably practicable: around 410 houses are being completed each day, and if they do not have fibre installed at the building stage they will require costly retrofitting later," the government statement said. “The recovery of costs is largely seen as a commercial matter for stakeholders."

The estimates assumed a cost of $2500 to connect fibre to a new home. About 150,000 new dwellings and 60,000 other premises are built each year and the government policy is for 90 per cent of premises to have fibre.

Master Builders CEO
Wilhelm Harnisch
said the cost would be added to home prices in the same way as the fees for electricity and water connections. Urban Taskforce chief executive Aaron Gadiel warned of much higher costs if developers had to pay for the back-haul connection between housing estates and the nearest telephone exchange or NBN access point.

“This legislation is like a blank cheque – at this point we don’t have the details to know what the government’s intentions are with off-site costs," Mr Gadiel said.

Mr Gadiel also said the government was wrong to equate the “desirable" broadband service with the “essential" services of water and electricity.

Residential Development Council executive Caryn Kakas described the government bill as “shell" legislation that left all the important decisions to the minister through subordinate legislation at a later point.

“Would we sign off on the legislation today? No," she said.

Ms Kakas said new home buyers would in effect pay twice for their broadband connection, first in the price of their house and second through the taxes they paid to fund the NBN.

“You’re now paying twice when everyone else is paying once – there’s no equity in that," she said.

“If we’re going to make this happen we’ve got to make sure it’s equitable."

Ms Kakas also said the start date for the fibre deployment law should be postponed from July 1 because the subordinate legislation was not yet known and there were no draft specifications to tell property developers what they needed to provide.